How Do I Pay for Nursing Home Care?

In 2010, the median daily rate for nursing home care in a semi-private room was $206, with an annual inflation rate of about 5%. Clearly, finding a way to pay for this type of care is an important consideration.

Of approximately 1.5 million nursing home residents in the U.S., more than 90% are over the age of 65. That means they are eligible for Medicare, and you might think that solves the problem of meeting those expenses. However, it's important to understand that Medicare pays for only certain types of nursing home care. Historically, on average less than 10% of patients are eligible.

Medicare does not cover what it calls "custodial care", which is basically non-medical assistance with the activities of daily living of the type provided by intermediate care facilities. What it does pay for is skilled care provided in a skilled nursing facility. (To understand the difference, see our guide "What Are the Different Types of Nursing Homes?")

Skilled care is defined by Medicare as health care provided when the patient needs "skilled nursing or rehabilitation staff to manage, observe, and evaluate" his or her care on a 24-hour-a-day basis. This level of care is typically required for a relatively short period of time after discharge from hospital treatment, and the limits on Medicare payments reflect that. Medicare coverage for skilled nursing care is as follows:

• Days 1-20: Medicare pays 100% of the cost.
• Days 21-100: Medicare requires a daily copayment, which may change annually but is well over $100.
• After day 100: Medicare stops paying after 100 days of care.

If the patient has some form of "Medigap" coverage (a Medicare supplement policy), some or all of the copayment may be covered, depending on the specific policy conditions.

Though we won't attempt to cover Medicare's coverage rules in detail, because they are complex and can change from time to time, these are some basic requirements that must be met to obtain Medicare coverage of a skilled nursing facility stay. The patient:

• Must have Medicare Part A coverage
• Must have days remaining in his or her Medicare Part A benefit period
• Must have had a qualifying hospital stay of three days or more
• Must enter the skilled nursing facility within 30 days of discharge from the hospital
• Must have doctor's orders for skilled nursing care
• Must require daily, inpatient skilled nursing care
• Must require skilled nursing care for either a condition treated during the qualifying hospital stay or a condition that developed while receiving skilled nursing care
• Must receive skilled nursing care in a Medicare-certified facility

Medicare coverage of a skilled nursing facility stay pays for:

• A semi-private room
• Meals
• Skilled nursing care
• Medical social services
• Medications
• Medical supplies and equipment
• Dietary counseling
• Ambulance transportation (when medically necessary to access services not provided at the skilled nursing facility)
• Physical, occupational, and speech therapy required because of the patient's condition.

To cover the Medicare copayment, or continued care once the 100 days of skilled nursing care benefits are expended, a few different options are available.

The first is private insurance. This may take the form of a Medicare supplement policy, many of which are designed to simply cover whatever Medicare doesn't. You'll want to carefully review the terms of any existing policy or a policy your loved one is contemplating purchasing to see exactly what it does cover. If the patient has health insurance as a retiree through his or her former employer or a union, it also may supplement Medicare.

Another more specific form of private insurance is long-term care insurance. These policies come in many forms, but generally speaking they pay for most forms of long-term care, especially care that is not provided in a skilled nursing facility and therefore falls outside of Medicare coverage. Such policies tend to cost less if they are purchased earlier in life, since the insurance carrier benefits from earning premiums over many years before care is required, so be aware that this coverage may be prohibitively expensive or even unavailable for initial purchase by an elderly person.

If the patient has limited financial resources, he or she may well be eligible for Medicaid. Medicaid is a state program, so rules will vary somewhat from state to state, but generally speaking, the combination of Medicare and Medicaid will cover most medical costs. For Medicaid information specific to your state, including benefits provided and eligibility requirements, contact your state Medicaid office. You can find a list of every state's Medicaid website provided by the Centers for Medicare and Medicaid Services at https://www.cms.gov/medicaideligibility/downloads/ListStateMedicaidWebsites.pdf.